Interactive Investor

The best and worst-performing investment trusts of 2023

Compared with funds and ETFs, a wide mix of trusts made the charts for the top and bottom performers.

21st December 2023 08:55

Sam Benstead from interactive investor

Rising interest in the first half of the year, followed by a central bank “pause” and then signals that interest rates could fall in 2024, led to a wide range of investment trusts performing well and poorly throughout 2023.

The lack of standout themes among the winning and losing trusts is also linked to changes in discounts to net asset value (NAV). Data from the Association of Investment Companies (AIC) shows that the discount of the average investment company has remained in double figures throughout the whole of 2023, the only year this has happened since the financial crisis. The average investment company discount started the year at 11.7% and hit a post-2008 trough of 16.9% at the end of October before recovering to 11.1% in mid-December.

The best and worst trusts came from a range of sectors, from technology and private equity, to real estate and renewable energy.

Because investment trusts are listed vehicles that can be used to access complicated and illiquid assets – such as aircraft leasing and private loans – returns can swing to extreme outcomes as sentiment changes.

We break down the 20 best-performing trusts this year, using data from FE Analytics for shareholder total return between 1 January 2023 and 13 December 2023, and also profile a number of popular but poorly performing trusts.

Best performers

The top trust was Intuitive Investments Group, whose shares rose 114% over the year. The trust invests in listed and unlisted life science companies, with at least half in private businesses. The trust has a £290 million market cap.

3i was also a standout performer. The private equity trust’s shares rose 80.2% over the year, as its 50% position in Action, a Dutch discount retailer, performed well.

A number of technology-focused trusts also made the grade. They were Polar Capital Technology (up 42.4%), Allianz Technology Trust (up 37.6%) and Manchester & London (up 68%).

Manchester and London owns a very concentrated portfolio: Microsoft is 30.5% of the portfolio, while Nvidia is 20.7%. Both shares have performed very well this year, helping boost the trust’s share price.  

Tech shares performed very well this year due to developments in artificial intelligence (AI). Kick-started by OpenAI’s launch of ChatGPT just over a year ago, which uses “generative AI” to answer questions, help with computer programming, and even solve maths problems, investors became very excited about companies building AI software, such as Meta and Microsoft. 

AI also demands lots of computer-processing power, so computer-chip companies, such as Nvidia and Advanced Micro Devices, have also risen in value this year.

Aircraft leasing was another strongly performing sector. Two trusts that made the top 20 were Nimrod Air Two Ltd (up 47%) and Amedeo Air Four Plus (up 32.4%).

Adding to the list of top-performing trusts in 2023 were private UK companies via Literacy Capital (up 30.4%) and exposure to a rising uranium price with Geiger Counter (up 33.3%). The uranium price has risen around 60% this year, partly because there was a rush to buy the nuclear reactor fuel from suppliers that are not based in Russia. 

Emerging markets via Vietnam Holding Limited, India Capital Growth and JPMorgan Emerging Europe Middle East & Africa Securities and JPMorgan Taiwan, also made appearances in the top performers list.

Other top trusts, outside the 20 best performers, included HgCapital Trust, up 18.3%, JPMorgan American, up 22.4%, BlackRock Latin American, up 17.4%, Alliance Trust, up 16.3%, and Tritax Big Box, up 18%.

Source: FE Analytics. Past performance is no guide to future performance.

Worst performers

Most of the biggest investment trust losers in 2023 were small, illiquid trusts that trade at wide discounts to their NAV.

However, looking outside the bottom 20 trusts, some well-known names stand out for having a disappointing year.

These include, with a 64% loss, Digital 9 Infrastructure. The trust owns digital infrastructure assets such as data centres, but is undergoing a strategic review which may see its assets sold off and capital returned to shareholders.

HydrogenOne Capital Growth lost investors 42%, as doubts over the future of hydrogen power cast a shadow over the trust, and higher interest rates sucked money out of speculative industries and into more secure tech companies and fixed income. The trust trades on a 54% discount.

The same pressures hurt the shares of Seraphim Space, which dropped 23%, and Baillie Gifford Schiehallion, which fell 30%. Both investment trusts own speculative private companies that have become less appealing as interest rates have risen.

Regional REIT dropped 42% as well, as it cut its dividend and pressure on investment trusts that generate an income for investors rose as bond yields increased.

It was a similar story at US Solar (down 38%) and Phoenix Spree Deutschland (down 37%), which are income-focused investment trusts and are now less appealing when investors can get around 4% annual returns from US and UK government bonds.

Doubts over the Chinese economy, such as rapidly slowing economic growth and deflation, hurt Chinese assets, sending JPMorgan China Growth & Income down 33.5% and Baillie Gifford China Growth Trust down 26.5%.

Other specialist trusts struggled, including life sciences investment trust Syncona, which fell 35.5% and Gresham House Energy Storage, down  30.6% in 2023.  

Source: FE Analytics. Past performance is no guide to future performance.

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